Communications Day - the weblog

Today we emailed our first issue of CommsDay AseanHK to our reader lists. If you'd like to see a sample issue please email Laraine Davis at laraine@commsday.com.au

Broadband saves the US telecom equipment sector, says Business 2.0

2006-02-07T17:40:00.000+11:00

Business 2.0: Broadband boosts Cisco, rivals - Feb. 6, 2006

Wireless cashcow continues...

2006-02-07T16:15:00.000+11:00

Bush administration sees $25 bln in wireless sales: Financial News - Yahoo! Finance

Is AOL7 the ghost at the feast by Richard Chirgwin (Comms Day 6 February)

2006-02-06T15:32:00.000+11:00

When the Telstra share price took a journey over the $4 mark last week, it did so on the back of a rumour that T3 would include a rights issue to existing shareholders. If the rumour was true – we won’t know that for quite some time – then institutions would need to go shopping ahead of the issue or be left out. So the rumour was enough to sucker some of the institutional buyers into placing orders for Telstra shares, and the price went up.

So: a rumour emerges, a share price rises, and the ASX investigates? Not at the time of writing, which merely demonstrates that the stock exchange is suffering one of those fits of narcolepsy which seem to overtake it every half-hour or so. Nor was there any visible scepticism among the press about the story itself or the subsequent share price rise.

But we seem to fall into fits of short-media-memory syndrome with depressing regularity. Another story to get some airtime last week was the launch of Yahoo!7, which is going to be Australia’s great media portal of the future.

Australia’s TV stations have a mixed history in the Internet which runs the gamut from embarrassing failure to utter catastrophe (Ninemsn might carry a TV station’s brand, but its success rests on its Internet content).

Somehow the excitement of the introductory video was too much, and the story was given the same depth of sceptical analysis that you might see offering motoring journalists a test-drive of the next McLaren street sports car. Wasn’t it Channel 7 that spent a few years pumping the notion of an Internet joint venture with someone from America? AOL? Hell, the URL (www.aol7.com.au) still functions, even though it gets an immediate redirect to Primus, which two years back relieved the TV station of a millstone around its neck.

AGAIN: And here we are again: big media and the Internet, marriage made in heaven, portal plus TV content plus advertising equals big dollars, right? Not on your nelly.

The TV industry, as I have remarked in the past, has never accustomed itself to changing consumer behaviour, a general erosion of leisure time, and the long slow death of novelty on the TV.

People don’t watch TV the way they used to – which of course is why ventures like AOL7, sorry, Yahoo!7 look so irresistible to the TV stations casting around for a new business model.

But a portal isn’t so new a business model, and although Yahoo! is a successful portal, the fact is that the main reason to go to a portal is that it lets you end up somewhere else.

Google’s name was made as a search engine, but its money comes not from its status as a portal, but because it serves advertisements to other Websites – the destinations people head for after they’ve been to Google.

In terms of income, Yahoo! is bigger than Google, but not that much bigger; one generated $US5 billion in a year, the other raked in $US2 billion. But Google doesn’t need the eyeballs to rake in the dollars; and Yahoo! does.

For all its faults, Google is one of the first companies to learn how to make money out of the natural behaviour of Internet users: since users are heading somewhere else, we’ll make money out of letting them go, instead of spending money trying to persuade them to stay.

TV stations like the portal model because “persuading users to stay” looks like something they understand. Hence the Yahoo!7 venture; which, I’m afraid, suggests that any lessons available from AOL7 have yet to be learned.

Richard Chirgwin

Shallowness reigns over Trujillo's "shortcomings" - from CommsDay 3 February

2006-02-06T14:57:00.000+11:00

It seems the media knives are out for Telstra CEO Sol Trujillo. The Australian Financial Review dedicated a heavily-promoted 5,500 word article last Saturday to Trujillo, depicting him as some form of corporate charlatan dedicated only to enriching himself and getting out of Telstra ASAP.

Extraordinarily, for an article of such length and lead time, there was little new in the piece and very little space given to a “pro” view of Trujillo, other than to those typecast as cronies such as Phil Burgess. Indeed, much of the material regarding Trujillo’s exits from US West and Orange was covered in Australia back in June 2005, including on 10 June in CommsDay by this writer.

Nevertheless, the AFR piece was followed up by Stuart Corner on ITWire this week in what could be best described as a question-without-answer piece. He opined that perhaps there had been shortcomings in the hiring process and also questioned whether Trujillo had the record to be anything more than a vocal opponent of competition regulation. Corner specifically sought evidence that Trujillo had previously “made over” a telco and revamped its customer service and business systems.

Well, Trujillo is powerful enough, resourced enough and articulate enough to defend himself. But one thing which seems pretty clear to me is that people who have suddenly discovered the ability to read online archives of Denver newspapers are also fairly selective in their inquiries and opinions. Far from being a fast company man, Trujillo spent an impressive 28 years working his way up through the ranks of Mountain Bell and then subsequent parent US West to get to the top job. US West did have a reputation for poor connection times and the like – this much is true. But this is almost entirely due to the fact that its 14 state service area comprised 7 of the most 10 sparsely populated states and 5 of the next 10 most sparsely populated states in the United States.

Indeed, US West (before and during Trujillo) was something of a telco pioneer. It was the first US local telco to introduce digital switching and caller ID, the first to offer residential and business ISDN and under Trujillo, the first to offer DSL. It also pioneered “one-number” home phone/mobile/office phone services. Trujillo’s team does have a track record on making over a telco.

Did US West vigorously resist unbundling? Yes it did, both through limiting its interconnect cooperation and direct lobbying. US West was always destined, under any leader, to act this way. As the most marginal and weak of the Bells it had the most to lose from Washington DC-directed competition policy. Regionalism is an important influence on economic actors in the States, just as it is in Australian telecoms!

COMFORTABLE EXIT: The centerpiece of the AFR article is the claim that Trujillo sold out to Qwest comfortable in the expectation of the money available under “change of control” provisions and then bolted as the whole dotcom bubble burst, leaving pensions (based on stock value) in the lurch.

In reality, Trujillo didn’t want to ultimately sell to Qwest, but was pretty much obliged to because they made a hostile takeover offer at a 30% premium to its prevailing stock price. That’s what happens with public companies! It’s worth remembering that Qwest was so valuable and US West so lowly priced by comparison as a result of the market view that the unregulated long distance firms had a brighter future than heavily regulated incumbent telcos! Trujillo left his 28 year association with US West – and millions of dollars in retention payments – precisely because he didn’t like the fast and loose style of the new owners and its chief, Joseph Nacchio.

US West stockholders were burned after the 2000 crash, this is true. As were many with any exposure to IT or telecom stocks at all.

Similar question marks were raised over his short stint at Orange. But as I reported in June, he was specifically brought in as an outsider to broker a peace between a the UK and French factions of that firm. He did so, raised sales, and presided over the absorption of Orange as a business unit of France Telecom. Mission as set was accomplished and although Trujillo’s departure was hasty and opaque, it was by no means an ejection prompted by failure.

PROFIT AND RUN: So will Trujillo and his American associates take the money and run, leaving Telstra in worse shape? Trujillo seems absolutely dedicated to doing things that improve profits – rationalising network platforms to save costs, deepening the capability of CRM systems to boost ARPUs, and, yes, fighting against regulations that are designed to facilitate the firm’s market enemies. It’s this last point that seems to confound his critics. How dare an American criticise Australian majority shareholder-imposed policy settings (unless they are the US Trade Representative)!

But it’s worth remembering that the current Australian regime is pretty much an American import itself, from the 1996 Telecommunications Act. Much of the thinking behind that Act has now been junked, not just because Bells spend lots of money on lobbying Congressional types, but because many of its legal and economic assumptions simply didn’t hold up when exposed to harsh light. This is where Trujillo, admittedly rather patronisingly, makes the claim that he has seen this movie before.

If you are a market combatant against Trujillo, you have every reason not to like his recent actions and perhaps to even scorn his personal history. But despite the best efforts of the commentariat, he is no charlatan – he is the real deal when it comes to international-class telco experience. To infer that he is someone of the ilk of a Bernie Ebbers, a Gary Winnick or a Scott Sullivan is unfair.

It’s worth remembering that some other sullied names from the bubble era – Nortel, Lucent and so on have been rehabilitated. Even the venerable BT have put Matt Bross in charge of their network – Bross is infamous for when, as Williams CTO across the Atlantic, he accepted free stock in tech startups such as Corvis and Sycamore when buying their product. BT no doubt saw the other side of Bross—an early IP visionary who had rare experience in creating cutting-edge next generation nets.

Grahame Lynch was the group editorial director of America’s Network magazine, based in California, between 1999 and 2001 and is author of “Bandwidth Bubble Burst” (2001).